Listed cement producer, Lafarge Cement, is anticipating a 30 percent decline in volumes during the current quarter as a result of the debilitating effects of the novel coronavirus (Covid-19) pandemic.
The global health pandemic is negatively impacting the construction sector — which is key to cement producers like Lafarge — as projects have slowed down or stopped due to numerous factors including supply chains disruption, shortage of subcontractors and materials and the termination of contracts to minimise costs. Said Larfarge management in a first quarter update:
“The declaration of the Covid-19 outbreak as a pandemic and the national lockdown effected from the 30th of March, has an inevitable impact on second quarter (Q2) 2020 volumes.
“It is projected that Q2 2020 volumes will decline by 30 percent, with the possibility of spill over risks impacting the second half of the year.”
A weak Q2 will undo progress achieved during Q1 when the cement manufacturer’s volumes remained in line with prior year and 3 percent above budget.
Management said average selling prices (ASP) during the period under review were below those of the prior year, although the product mix was favourable against budget.
The firm managed to maintain distribution costs at below both prior year and current year budget.
Meanwhile, a US$2 million Dry Mortars Mix (DMX) expansion project is expected to be commissioned in August 2020.
And on another positive note for Lafarge, management said the Reserve Bank of Zimbabwe has concluded the legacy debt verification exercise and the business successfully secured part of its legacy foreign creditor obligations.
Going forward, the group expects Covid-19 to have longer-term impacts on its business.
“The ripple effects of the lockdown and border closures are still to be fully quantified, but the business expects to continue to feel the effects of the Covid-19 outbreak into the second half of the year.
“The net effect will be a slowdown in aggregate demand in the core individual home builder market with foreign funded projects becoming more and more essential in sustaining operations.”
Management also said it is cognisant of the need to protect jobs and the welfare of its workers during the pandemic.
“In order to mitigate the financial impact of the situation, the company has launched the action plan “Health, Cost & Cash” for immediate execution. Under this initiative, the health of employees, their families and the company’s stakeholders remains top priority. A number of systems have been set up to ensure sustained wellness for all during and beyond this period. Various actions that have potential to stop the spread of the virus among employees and contractors have been implemented, including a Work from Home (WFH) policy that has been rolled out for applicable roles,” said Lafarge.
“This has been achieved with the requisite support to ensure employee productivity and wellbeing while working remotely. Furthermore, we are focused on continued containment of our costs.
“This involves activities to bring costs down, improve efficiencies and innovations to optimise costs without compromising the quality of operations.
“The business is focused on advancing the use of digital customer interface platforms to drive sales and maintain customer engagement with the company’s product offering. This puts the business in a relatively strong position during and beyond the Covid-19 pandemic.”